The FHA Loan Handbook states that a borrower may use alimony/child support income to qualify for an FHA home loan if it can be verified and meets FHA requirements. How does your FHA lender may consider alimony and child support as part of a borrower’s effective income?

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Verifying Alimony and/or Child Support for FHA Loans

May 16, 2017 - The FHA Loan Handbook states that a borrower may use alimony/child support income to qualify for an FHA home loan if it can be verified and meets FHA requirements. How does your FHA lender may consider alimony and child support as part of a borrower’s effective income? From HUD 4000.1:

“Alimony, child support, or maintenance income may be considered effective, if
payments are likely to be received consistently for the first three years of the mortgage
the borrower provides the required documentation, which includes a copy of the:

final divorce decree

legal separation agreement,

court order, or

voluntary payment agreement,

And the borrower can provide acceptable evidence that payments have been received during the last 12 months, such as:

cancelled checks

deposit slips

tax returns, or

court records.”

The paperwork such a legal divorce decree or court order is easy to understand-the lender needs something official to verify any payment arrangement. The voluntary payment agreement issue is a bit tricker-what is considered an acceptable voluntary payment agreement? FHA loan rules do not spell out exactly what may be required, and such requirements may vary from state to state depending on the law.

Additionally, your lender may have a standard; in any case the lender will be required to document the income by means of the cancelled checks and other evidence as listed above.

It is important to note that we’re talking about a type of income here that is specifically defined by FHA loan rules:

“Alimony, Child Support, and Maintenance Income refers to income received from a former spouse or partner or from a non-custodial parent of the Borrowers minor dependent.”

And there is also this additional clarification from HUD 4000.1:

“The Mortgagee must obtain a fully executed copy of the Borrower’s final divorce decree, legal separation agreement, court order, or voluntary payment agreement with documented receipt. When using a final divorce decree, legal separation agreement or court order, the Mortgagee must obtain evidence of receipt using deposits on bank statements; canceled checks; or documentation from the child support agency for the most recent three months that supports the amount used in qualifying.”

How are voluntary payment arrangements for alimony or child support documented?

“The Mortgagee must document the voluntary payment agreement with 12 months of canceled checks, deposit slips, or tax returns. The Mortgagee must provide evidence that the claimed income will continue for at least three years. The Mortgagee may use the front and pertinent pages of the divorce decree/settlement agreement and/or court order showing the financial details.”

Your loan officer can help you with further details on what may be required in your state. State law and lender standards may apply in addition to the FHA loan rules discussed here.

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